As it prepares for a possible U.S. IPO, Chinese-founded fast fashion giant Shein is attempting to win over the larger U.S. retail sector in addition to politicians in D.C.
The National Retail Federation must be consulted first.
According to those familiar with the situation, Shein, which filed to go public in the United States late last year, has been turned down many times when she has attempted to join the biggest and most influential trade group for the retail sector. Since the discussions are confidential, the participants talked under the condition of anonymity.
Joining the NRF wouldn't significantly affect the operations of the majority of businesses. The company serves as the main lobbying vehicle for the retail sector in Washington, D.C., and offers a variety of advantages, including research on industry trends and access to NRF events.
However, Shein is currently on a charm attack. It has been trying to persuade legislators that, in spite of worries about its supply chain, its connections to China, and its exploitation of a trade law loophole, it can be trusted as a publicly traded firm on American markets.
Shein is also embroiled in a convoluted geopolitical struggle between Beijing and the United States. Lawmakers have targeted Shein because they fear the firm uses forced labor in the production of its items and shares customer data with the Chinese government. Shein has apparently been under so much scrutiny that the shop is thinking about going public in London instead. of the U.S.
Shein is expected to be among the largest debuts of the year, having just been valued at $66 billion, according to a prior report from CNBC. Its annual sales is far over $30 billion, according to a significant retail partner. Its ascent has threatened mass-market companies like Target, Walmart, and Amazon and cut into the market share of a number of US-based rivals, including Gap Inc., TJX Companies, and Macy's.
Legitimacy in the eyes of federal lawmakers might be enhanced if Shein receives endorsements from the top retailers and digital businesses in the world, who lead the retail industry's de facto voice. Additionally, it could mitigate what's been an otherwise rocky road to an IPO in the United States.
That would undoubtedly increase the pressure on the lawmakers to approve the business, don't you think? only because the company's peers acknowledge it and believe it to be a respectable rival. According to John Zhang, a professor at the Wharton School and the founding director of the Penn Wharton China Center, "that would definitely create a little bit more legitimacy." Above all, I believe that [NRF membership] really gives investors the impression that this is simply another typical shop. Steve Dennis, a retail consultant with experience at Neiman Marcus and Sears, concurs that NRF's decision to hire Shein may serve as a constructive impetus for the business.
"I doubt that would inevitably imply the Though I believe it would be a significant step in the right direction and a feather in their crown, I don't think the federal government or the [New York Stock Exchange] will be okay with them,” said Dennis. "You kind of see the NRF as the industry voice, so if they're cool with it, maybe we should be too."
According to persons familiar with the situation, the NRF hasn't completely rejected Shein's application for membership and has been in communication with the store over its request, as CNBC was informed. The trade association is willing to accept Shein.
The NRF "does not comment on our membership process or on individual retailers," according to an NRF representative. Declared that it "disagrees with many of the characterizations" in the story from CNBC, but he refrained from going into further detail.
Shein said she would not comment. Shein's application for membership in the NRF was denied for unknown reasons, although one of the persons with knowledge of the matter claims that a powerful individual is adamantly opposed to the company's acceptance. The individual refused to elaborate on the identity of the potential influencer.
There is an executive committee and a leadership team on the NRF board. Two persons acquainted with the organization's activities say that those individuals have the closest relationship with Matthew Shay, the trade group's CEO, who has participated in membership talks with Shein.
Shay, CEO of Walmart U.S. John Furner, CEO of BJ's Wholesale Club Bob Eddy, and former Qurate president and CEO Mike George make up the leadership group. QVC is owned by Retail. Eight other prominent industry insiders, including Tony Spring of Macy's and Brian Cornell of Target, are on the executive committee.
According to three NRF board members who spoke to CNBC on the condition of anonymity, merchants wishing to join the NRF are normally accepted as long as they are engaged in retailing and pay the dues. This is the case for most trade groups.
It's unknown what qualifications are necessary to join the NRF specifically, as well as how new members are chosen. The NRF refused to comment on such specifics.
"Companies principally engaged in retailing are eligible for membership in the Federation," reads an online application for NRF membership. The questionnaire asks about a retailer's The NRF statutes stipulate that members must pay dues "based on total annual sales as reported in the most recent fiscal year," along with the annual sales volume and total number of retail units. The NRF stated that the membership form is around a year old, but it would not specify if any significant updates had been made since it was posted online.
The long-serving NRF board members who spoke with CNBC claimed that Shein's membership application had not been discussed in board meetings and that they are not engaged in choosing which businesses are allowed access. This implies that the senior NRF officials would have the last say when it comes to potential members.
These kinds of subjects will come up in quiet chats. We discuss membership proposals and new additions, membership trends, and general membership as part of our governance, although we don't usually go into detail concerning particular businesses," remarked a board member.
According to two board members, there have never been any cases when the NRF refused to grant a retailer membership. One person pointed out that the trade association has made an effort to broaden its appeal and has attempted to enter unconventional areas, such as the IT industry.
One board member told CNBC, "I don't think they are in the business of turning anyone down." The NRF organizes "Retail's Big Show," a major annual conference in New York City that brings together the leading businesses in the sector. Shein has been noticeably missing from the occasion in previous years.
Not that Shein is unimportant to those attending NRF; rather, the company's influence on the fashion industry was extensively discussed by attendees at conferences and in formal sessions, but the company wasn't asked to share the tactics that fueled its explosive growth.
Retail experts from Publicis Groupe and Coresight Research hosted a panel discussion about Shein and Chinese retailer Temu at the NRF's Big Show in January. The topic was titled "Coming to America: What Can We Learn from Chinese Brands in the U.S."
The two experts discussed the tactics that have propelled Shein's expansion during the panel and listed the "10 essential actions" that shops must take "to rival Shein and Temu." Throughout the presentation, participants excitedly held out their phones to take pictures of the slides. In the meanwhile, Shein has been present at retail conferences throughout the globe. a constant. According to LinkedIn posts and conference agendas, the company was present at several prominent industry conferences in the past year, such as the World Retail Congress in Paris, the Global E-commerce Leaders Forum in Los Angeles, the OMR Festival in Hamburg, Germany, and even the World Economic Forum's Annual Meeting in Davos, Switzerland.
For the second year in a row, Shein gave a presentation at the annual Shoptalk conference in Las Vegas in March. Company representatives shared the platform with representatives from Reformation, a sustainable fashion brand, and Wayfair, a home goods store.
Although Shein has received a warm reaction on stage at these events, which mostly rely on sponsors to generate income, things weren't quite as warm behind closed doors.
At a cocktail party outside of Shoptalk, the youthful creator of a fashion sustainability firm discretely called Shein their "mortal enemy" after noticing two of its employees there.
The creator was alluding to some of the sustainability issues that Shein has encountered, such as claims that its inexpensive apparel encourages excessive consumption and that the materials used to make its garments come from areas that are known for using forced labor. Retail expert Dennis suggested that the NRF's worries about Shein may have something to do with the ethical issues surrounding the firm, at least on the surface. However, Dennis claimed that the way Shein is competing and gaining market share is what most enrages the retail community.
"Isn't their development remarkable? ... They are no longer there. From that perspective, if your business competes with them, you're losing market share, since they went from having no market share to having a significant amount in a matter of years, Dennis said. That is disliked by everybody.
Furthermore, he noted, there is the idea that Shein is unfairly competing due to its utilization of a particular loophole in U.S. tariff laws known as the de minimis rule. items under $800 are exempt from import charges and don't undergo the same amount of scrutiny as other items, according to the law. Shein's success is frequently linked to the retailer's denial of the accusation that it gains from not having to pay tariffs.
For instance, in 2022, David's Bridal, H&M, and Gap paid $19.5 million, $205 million, and $700 million, respectively. the House Select Committee on the Chinese Communist Party, Shein and Temu paid nothing in import customs and, respectively, a total of one hundred fifty thousand dollars.
Because of Shein's use of the de minimis rule and its fears that products it sells to the United States are manufactured using forced labor, the committee is looking into the firm. Shein has declared that it is dedicated to abiding by the rules and laws of the markets in which it conducts business and that it is attempting to remove all raw materials from prohibited areas from its supply chain. The NRF finds itself in a difficult situation given the ire that the retail sector has for Shein. Shein's acceptance as a member of the trade association may annoy its powerful member base, yet In order to refuse the corporation access, there must be a good cause.
Although Shein's ethical issues are not exclusive to the corporation, the NRF may rely on them. The CCP committee addressed identical letters to Adidas and Nike, whose vice president of global retail operations was on the board of the NRF foundation in 2022, after it started an investigation into Shein last year on the company's use of forced labor.
Furthermore, the fashion industry as a whole has challenges when sourcing raw materials from areas where forced labor or other human rights violations are prevalent. It's a problem that has also alienated other major international corporations represented on the NRF board.
Shein's rejection due of its unfairnessIt would also be difficult to convince someone to invoke the de minimis clause. Unlike several other trade groups, the NRF has not yet taken a hard stance on de minimis, despite the fact that many of its members are vehemently opposed to its usage or that of competitors.
A spokesman for the NRF claimed the organization had no official stance on de minimis when questioned.
The spokeswoman stated, "We encourage U.S. Customs and Border Protection to collect more detailed information in order to improve enforcement and ensure that only legitimate products are entered under the program."
Of course, Shein's connections to China may be sufficient to bar it from joining the NRF, but one of the board members of the trade association said the group is thinking about going global.
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